Infrastructure is a major investment opportunity for the private sector, with $58.6 trillion in needs over the next 15
years, according to a report published last week by Citigroup.
Citi’s report, Infrastructure for Growth: The Dawn of a New Multi
–
Trillion
Dollar Asset Class, said global infrastructure
spending will need to increase from $2.5 trillion per year to $3.6 trillion from 2016 to 2030 to close a nearly $60 trillion
deficit. The report includes water, power, transportation and telecommunications in
its study.
Citi laid it an economic argument for boosting infrastructure investments; noting that every 1 percent increase in
global infrastructure spending would lead to a 1.2 percent growth in GDP.
Citi said the private sector is well
–
suited to step in
for indebted governments to spend on infrastructure, and the asset
class offers clear advantages to investors through. Equity and bond returns have been at historic lows in recent
years, and investors are pushing for long
–
term stable cashflows.
Citi group
argues that more spending in any kind of infrastructure
–
transport, communications, and utilities
–
can help
fuel growth by boosting demand in the near term and supporting supply in the long term. An increase in investment
spending can lead to more demand for
goods, services and job creation. Longer
–
term effects will be an increase in
productive capacity resulting from better roads, faster trains, bigger ports and more reliable power supplies.
The report noted a paradox regarding infrastructure development acr
oss geographies: the biggest needs are in
emerging economies, but these are countries that are least able to afford increased spending.
Some of the most important geographies in which investors can look to increase infrastructure spending include the
US, U
K China and India.
In the US, total infrastructure needs from 2016 to 2025 amount to $3.3 trillion
–
mostly in surface transportation, which
is more than 50 percent unfunded.
In the UK, a “significant backlog of infrastructure projects” has accumulated si
nce the financial crisis. The UK
government has committed to invest £100 billion ($122 billion; €112 billion) by 2020
–
2021 as part of a £239 billion
overall project pipeline. Citi said it expects the UK government to increase public infrastructure investme
nt following
Brexit, accompanied by the launch of new government infrastructure bonds.
China is one of the largest infrastructure investors in the world, committing an average of 8.5 percent of GDP in
recent years. However, in terms of infrastructure quali
ty, it ranks 51 out of 144 countries. Infrastructure needs from
2010 to 2020 have reached $43 trillion. China has highlighted key transport projects like high
–
speed rail and roads in
its previous spending plans.
Between 1999 and 2011, India spent 4.75 perc
ent of its GDP on infrastructure investment. In the country’s 12th Five
Year Plan, it said that to attain 9 percent real GDP growth, its infrastructure investment must be an average of 10
percent of GDP.
